KUALA LUMPUR/DUBAI, Oct 1 - Dubai Group, an
investmentvehicle owned by the ruler of Dubai, is reviewing
options for its stake in Malaysia's Bank Islam as it shifts its
strategic focus closer to home, it said on Thursday.

If Dubai Group eventually sells its stake in Bank Islam, it
could spark a round of consolidation among Malaysia's Islamic
banks. Several Islamic bankers in Malaysia have said Maybank's
Islamic subsidiary wanted to acquire a stake in Bank Islam.

"Dubai Group confirms that it is in the process of reviewing
its strategic options relating to its (Bank Islam) stake," it
said in a statement on its website. "Following the reassessment
of its investment strategy, Dubai Group has redirected its
competitive advantage closer to home."

Bank Islam, Malaysia's No 2 sharia bank, had offered
preference shares to its shareholders in April to raise up to
540 million ringgit ($156 million). But Dubai Financial Group, a
unit of Dubai Group which holds a 40 percent stake in the
Malaysian lender, refused the offer, Bank Islam said on
Thursday.

Maybank Islamic is the biggest Islamic bank in Malaysia,
which has one of the world's most developed Islamic financial
industries, thanks to a vast sharia bond market and a
well-established regulatory framework.

KuwaitFinance House Malaysia, a subsidiary of Kuwait's top
Islamic bank, and Islamic Bank of Asia, which is backed by
Singapore's DBS, have said they are on the lookout for
acquisition opportunities in the region.

DUBAI RESTRUCTURES

Dubai Holding, Dubai Group's parent, is undergoing a
transformation to help it weather the global crisis.

"They are looking into assets that can be liquidated to
generate cash and to support the restructuring process," said
Samer al-Jaouni, general manager of Middle East Financial
Brokerage Co.

"The focus will be more on local markets, they will become
more picky in overseas investments ... I think this will become
the strategy going forward," he said.

Dubai Group said, however, that Malaysia remained a key
market for future investments.

Both Malaysian shareholders took up the share offer,
allowing Bank Islam to raise its Tier 1 capital by 324 million
ringgit, it said in a statement.

"Dubai Financial has not taken up the offer to subscribe to
its portion of the (share offer) by 30 September 2009 amounting
to 216.0 million ringgit," Bank Islam said, adding it would
offer the shares to the other two shareholders on a pro-rata
basis.

Both shareholders have to decide whether to take up the
offer within seven days, it said.

Talk has circulated through the past year of a change in
Bank Islam's shareholding, with speculation Dubai Financial
would sell its stake to Maybank Islamic.

The Dubai investor dismissed such talk in February, saying
it was a long-term strategic investor in Bank Islam.
(Editing by John Irish and David Holmes)